The supplier has the right to appeal against actions (inaction), decisions of the customer, the organizer of public procurement, the unified organizer of public procurement, commissions, experts, a single operator in the field of public procurement

By virtue of part 5 of Article 100 of the CPC, if the body reviewing the complaint has not made a decision on the results of the complaint within the time limits set by the CPC, then from the date of expiry of the time limits, it is considered that the body reviewing the complaint has refused to satisfy the complaint.

Paragraph 1 of Article 47 of the Law stipulates that a potential supplier has the right to appeal against the actions (inaction), decisions of the customer, the organizer of public procurement, the single organizer of public procurement, commissions, experts, a single operator in the field of public procurement, if their actions (inaction), decisions violate the rights and legitimate interests of the potential supplier.

The State audit and financial control bodies monitor compliance with the legislation of the Republic of Kazakhstan on public procurement within the limits of their powers established by the Law of the Republic of Kazakhstan "On State Audit and Financial Control" (hereinafter – the Law on GAiFK).

Actions (inaction), as well as decisions of the authorized body and bodies of state audit and financial control may be appealed in accordance with the procedure established by the legislation of the Republic of Kazakhstan (Article 18 of the Law on Public Procurement).

The authorized body for internal state audit conducts desk control, which is another form of control carried out by a territorial subdivision of the department of the authorized body for internal state audit without visiting the object of state audit and financial control (hereinafter referred to as the object of state audit) based on the analysis and comparison of information system data, as well as information on the activities of state audit facilities.

The procedure for conducting desk control is regulated by the Rules for Conducting Desk Control, approved by Order No. 598 of the Minister of Finance of the Republic of Kazakhstan dated November 30, 2015 (hereinafter referred to as Rules No. 598).

Desk control of public procurement procedures is carried out prior to the conclusion of public procurement contracts.

Based on the results of desk control, the territorial subdivision of the authorized body (DVGA) draws up and sends to the objects of state audit a notification on the elimination of violations identified by the results of desk control, in accordance with the form established by Rules No. 598 with a description of the violations identified, and is automatically registered on the web portal.

The notification is sent to the state audit facility via the web portal no later than five working days from the date of detection of violations. The decision of the DVGA is executed by the object of the state audit within ten working days from the day following the day of its delivery (receipt) to the object of the state audit.

In case of disagreement with the decision of the authorized body, the potential supplier has the right to appeal it to the appeal commission in accordance with the procedure provided for by the legislation of the Republic of Kazakhstan on state audit and financial control (paragraph 7 of Article 47 of the Law).

Paragraph 8 of Article 47 of the Law, as part of a pre-trial settlement, gives a potential supplier the right to choose whether to apply to a higher authority or to a court (Decisions of the authorized body taken as a result of consideration of the complaint may be appealed in court in accordance with the legislation of the Republic of Kazakhstan).

In case of challenging the results of the competition through the web portal, a potential supplier has already filed a complaint with the DVGA, thereby complying with the pre-trial settlement of the dispute.

If the deadline for filing a complaint with the DVGA is missed, the complaint is considered as part of an electronic state audit in accordance with the legislation of the Republic of Kazakhstan on state audit and financial control.

The obligation to settle a dispute in a pre-trial manner for a camera control facility in case of disagreement with the decision of the authorized body is provided for in paragraph 9 of Article 47 of the Law.

It follows from the content of Article 58-1 of the GAiFK Law that objections to the audit report, appeals against decisions, actions (inaction) of the authorized body for internal state audit and (or) its officials are considered by the appeals commission under the authorized body for internal state audit.

According to paragraph 2 of Article 58-6 of the Law, the appellate settlement of disputes in the cases provided for by this Law is mandatory.

A potential supplier has the right to file a complaint, and the organizer, the customer, file an objection, which are considered in accordance with the procedure and deadlines set out in Chapter 11-1 of the GaiFK Law and the regulations on the appeals commission under the authorized body for internal state audit, approved by order of the First Deputy Prime Minister of the Republic of Kazakhstan. – The Minister of Finance of the Republic of Kazakhstan dated March 20, 2020 No. 302 "On Approval of the Composition and Regulations on the appeal commission for Reviewing Objections to an audit report or an audit report on financial Statements, Notification of the elimination of violations Identified by the results of desk control by the authorized body for internal State audit, and Appealing decisions, actions (inaction) of the authorized body on internal state audit and (or) its officials".

The Appeal Commission, based on the results of consideration of an objection, complaint, makes one of the following decisions::

1) on the full or partial satisfaction of the objection, complaint;

2) the refusal to satisfy an objection or complaint with the justification for making such a decision.

The decision of the appeal commission is made in writing and is binding on the subject of state audit.

The results of consideration of objections and complaints are drawn up by the authorized body for internal state audit within two working days from the date of the decision by the appeals commission. The results of consideration of an objection are formalized by an opinion (paragraph 30 of Rules No. 598).

On public procurement issues, the decisions of the appeals commission are posted on the public procurement web portal within one working day from the date of sending the results of consideration of the objection or complaint to the applicant.

The decision taken by the appeals commission is appealed in court in accordance with the requirements of the APPC.

REFUNDS OF ADMINISTRATIVE CLAIMS

The main reason for the returns due to lack of jurisdiction was that the contested administrative act was issued in electronic form and therefore should be considered at the location (residence) of the plaintiff. This rule was introduced in the APPC and at the initial stage of judicial practice influenced the increase in the number of refunds. A large number of lawsuits were returned by the court of first instance of Astana city due to the fact that the central administrative authorities are located in the capital.

In accordance with the first and second parts of Article 3 of the CPC, it regulates relations related to the implementation of internal administrative procedures, administrative procedures, as well as the procedure for administrative legal proceedings. The participants in the relations regulated by the Code are state bodies, administrative bodies, officials, as well as individuals and legal entities. The subject of the legal regulation of the APPC is the activity of administrative bodies related to the adoption, cancellation, modification, and execution of a legally authoritative decision aimed at establishing, changing, or canceling the rights and obligations of specific persons, and performing legally significant actions.

Based on the meaning of paragraph 1 of the NPA No. 5, the courts should distinguish between disputes arising in the process of selecting a supplier and concluding a contract with him on GZ, the procedure for consideration of which is regulated by the rules of the CPC, and disputes arising from the contract on GZ, which are considered in civil proceedings.

The courts have received claims arising from the GZ agreement, in particular, regarding the recognition as illegal and cancellation of: a) the actions of the customer to send a notice of termination of the agreement; b) the defendant's inaction to take measures to terminate the agreement and the obligation to terminate it; c) notification of termination of the agreement unilaterally; d) actions to the direction of such notification.

The return of such claims by the courts is justified by the fact that disputes are not based on administrative or other authority or dependence of one party (supplier) to the other (customer) by virtue of the powers of administrative bodies established by regulatory legal acts. In this case, the stated claims contain a dispute over the terms of the contract concluded between the customer and the supplier, which excludes public relations between them.

In such cases, the claims were lawfully returned under subparagraph 2) of part seven of Article 3 of the CPC, which states that cases whose procedure is provided for by the CPC are not subject to consideration in administrative proceedings.

The plaintiffs challenged the audit report and the audit opinion based on the results of the internal state audit, and the courts reasonably concluded that such claims had been returned.

It should be noted that for a short time there were questions about the jurisdiction of these disputes due to the repeated amendments to Article 19 of the GAiFK Law.

Thus, from July 1 to July 6, 2021, this article stipulated that the GAiFK bodies recognize the results of the state audit conducted by other GAiFK bodies, with the exception of documents from the internal audit services, in accordance with paragraphs 2, 3, 4

and 5 of this Article, if they are not recognized by the court as illegal in accordance with the legislation of the Republic of Kazakhstan on administrative proceedings. Since July 6, 2021, this rule has been amended with the transfer of disputes to civil procedural jurisdiction, which, according to the authors of this Analysis, is reasonable from the point of view of legal logic, since the auditor's report2 and the auditor's report3, in the first case, contain the conclusions and recommendations of the auditors, in the second, the results of the audit. However, these documents4 are not mandatory criteria of the administrative act 5.

At the same time, the courts should pay attention to the fact that, according to subparagraph 1) of paragraph 2 of Article 5 of the GAiFK Law, one of the financial control response measures is to issue mandatory orders for all government agencies, organizations and officials to eliminate identified violations and to consider the responsibility of those who committed them.

In addition, paragraph 7 of Article 58-4 of the same Law presupposes the right to appeal against the decisions of the appeal commission of the authorized body in the field of GAiFK.

Challenging such orders and decisions of the appeals commission is carried out in administrative proceedings, as well as challenging the actions (inaction) of GAiFK bodies and (or) their officials6, if they meet the criteria of an administrative act, action (inaction).

JURISDICTION OF ADMINISTRATIVE CASES  

According to the second part of Article 102 of the CPC, the courts have jurisdiction in administrative proceedings over disputes arising from public law relations provided for by this Code.

Paragraph 2 of the NPS No. 4 clarifies that challenging the results of the GZ, decisions of the authorized body on the registration of a potential supplier in the RNU, as well as decisions, conclusions, instructions, notifications of the authorized body based on the results of the audit of the GZ, is carried out in accordance with the procedure provided for in part three of Article 106 of the APPC, at the place of residence (location) of the plaintiff.

If the plaintiff, along with the claim for recognition of the results of the tender as illegal, requires that the concluded GZ agreement be declared invalid on this basis, then such claims are subject to joint consideration by the SMAS, taking into account the requirements of part three of Article 84, part three of Article 155, part two of Article 156 of the CPC.

The authors of the analysis draw attention to the fact that the above provision of the NPS has been repeatedly pointed out at operational meetings and seminars held for judges of administrative jurisdiction. However, there are cases of refunds of claims regarding the recognition of GZ agreements, whereas they are filed jointly with claims for appealing the results of the GZ.

NPS No. 4 also provides that in this case, regarding the claim for invalidation of the contract, the plaintiff is not required to comply with the pre-trial dispute settlement procedure provided for in the contract.

Claims of a potential supplier against actions (inaction), decisions of the customer, the organizer, the single organizer of the GZ, commissions, an expert, a single operator in the field of GZ, as well as actions (inaction), decisions of the authorized body and GAiFK bodies are subject to review by the SMAS.

Claims of the organizers of the GZ, customers related to the application of subitems 1) and 3) of the first part of paragraph 4 of Article 12 of the Law on GZ, as well as claims arising from the execution of contracts on GZ, are subject to consideration by the Council of Economic Cooperation.

Claims challenging the decision of the authorized body to recognize a potential supplier as an unscrupulous participant in the GZ, recognized as such in accordance with subparagraph 2) The first part of paragraph 4 of Article 12 of the GZ Law is subject to review by the SMAS.

PRE-TRIAL PROCEDURE

The objectives of administrative procedures are: the full realization of public rights, freedoms and interests of individuals and legal entities; achieving a balance of private and public interests in public relations; strengthening the rule of law in the public sphere.

If the law establishes a pre-trial dispute settlement procedure, an appeal to the court may be filed after observing this procedure (part 3 of Article 9 of the CPC).

In accordance with paragraphs 1 and 5 of Article 91 of the CPC, a participant in an administrative procedure has the right to appeal an administrative act, an administrative action (inaction) not related to the adoption of an administrative act, in an administrative (pre-trial) manner.

Unless otherwise provided by law, an appeal to the court is allowed after a pre-trial appeal.

According to paragraph 6 of Article 12 of the GZ Law, if a potential supplier does not agree with the decision of the authorized body to recognize him as an unscrupulous participant in the GZ provided for in the second part of paragraph 5 of this article, then such a potential supplier has the right to apply to the conciliation commission no later than ten working days from the day when he became aware of the inclusion in the GZ commission in accordance with the procedure determined by the authorized body.

The Conciliation Commission considers the application of a potential supplier who has evaded the conclusion of a GZ agreement and decides whether to exclude or refuse to exclude such a potential supplier from the RNU.

If a decision is made to exclude a potential supplier from the RNU, the customer applies to the authorized body.

The authorized body makes a decision on the exclusion of a potential supplier from the RNU, taking into account the decision of the conciliation commission.

To date, the powers of the conciliation commission include reviewing appeals from potential suppliers and clarifying the circumstances and the validity of the reasons that served as the basis for issuing the order, which may further eliminate the need to file claims with the court.

By virtue of the requirements of part 5 of Article 91 of the CPC, unless otherwise provided by law, an appeal to the court is allowed after a pre-trial appeal.

By Order of the Minister of Finance of the Republic of Kazakhstan No. 176 dated February 17, 2022, the Model Regulation of the Conciliation Commission was approved.

The deadline for applying to the conciliation commission is set at 60 calendar days from the date of recognition as an unscrupulous participant in the GZ.

At the same time, there are cases when potential suppliers miss the deadline for applying to the conciliation commission and go to court, citing the loss of the possibility of a pre-trial settlement of the dispute.

Missing the deadline for applying to the conciliation commission gives a potential supplier reason to believe that it is possible to go to court without necessarily settling the dispute in a pre-trial manner.

The creation of such a practice may lead to potential suppliers abusing their right to judicial protection, as well as an increase in lawsuits.

Part 2 of Article 92 of the CPC provides for the right of a participant in an administrative procedure to file a petition with the body reviewing the complaint to restore the missed deadline for filing a complaint.

In accordance with subparagraph 2) According to paragraph 4 of Article 12 of the Law, the register of unscrupulous participants in public procurement is a list of potential suppliers identified by the winners who evaded the conclusion of a public procurement contract.

Paragraph 5 of the same article stipulates that the register of unscrupulous participants in public procurement provided for in subparagraph 2) The list of potential suppliers identified by the winners (potential suppliers who took second place) who evaded the conclusion of a public procurement contract is formed on the basis of a decision of the authorized body on recognizing potential suppliers as unfair participants in public procurement.

According to part 3 of Article 43 of the Law, the draft public procurement contract must be certified by the winner of public procurement by means of a tender, auction, request for price proposals through an electronic digital signature within three working days from the date of receipt on the public procurement web portal of the notification with the attachment of the draft public procurement contract.

Paragraph 1 of Article 44 of the Law stipulates that if a potential supplier, recognized as the winner, has not submitted a signed public procurement contract to the customer within the time limits established by this Law or, having concluded a public procurement contract, has not provided security for the execution of the public procurement contract and (or) the amount in accordance with article 26 of this Law. (if any), such a potential supplier is deemed to have evaded the conclusion of a public procurement contract.

According to paragraph 22 of the "Rules for the formation and maintenance of registers in the field of public procurement", approved by Order of the Minister of Finance of the Republic of Kazakhstan dated December 28, 2015 No. 694, if a potential supplier recognized as the winner or runner-up, within the time limits established by Law, has not signed a public procurement contract through the web portal, such a potential supplier by the decision of the authorized body, adopted by

through the web portal, in accordance with Appendix No. 5 to these Rules, it is automatically included in the register of unscrupulous participants in public procurement.

Thus, a potential supplier may be recognized as an unscrupulous participant in public procurement.:

if the GZ agreement is not signed within three working days from the date of receipt of the notification on the web portal of public procurement with the attachment of the draft agreement.;

if, having concluded the GZ agreement, the potential supplier has not provided security for the execution of the agreement.

The order of the authorized body is an onerous administrative act.

The NPS clarifies that when considering administrative claims to appeal decisions of the authorized body on the registration of a potential supplier (supplier) in the RNU, in connection with evasion from concluding a public procurement contract, the courts should proceed from the requirements of paragraph 3 of Article 43 of the Law, which establishes the obligation of the winner of the procurement contract to sign the contract.

If the contract is not signed, the potential supplier must prove that he took all necessary measures to sign it, but due to objective circumstances beyond his control, he was unable to sign it.

It should be noted that according to Chapter 2 of the CPC, one of the principles of administrative procedures and administrative proceedings is the proportionality of an administrative act, administrative action (inaction).

In accordance with article 10 of the CPC, when exercising administrative discretion, the administrative body and the official ensure a fair balance of interests between the participant in the administrative procedure and the company. At the same time, an administrative act or an administrative action (inaction) must be proportionate, that is, appropriate, necessary and proportionate.

The provisions of paragraph 5 of Article 12 of the Law do not establish that the decision of the authorized body to recognize a potential supplier as having evaded the conclusion of a public procurement contract is made automatically.

The arguments about the automatic formation of the contested orders do not comply with the principles of administrative justice, such as fairness and proportionality.

The authorized body is obliged, while maintaining objectivity and impartiality, to provide a potential supplier with equal opportunities and conditions for exercising his rights to a comprehensive and complete investigation of the circumstances of the administrative case (Part 1 of Article 8 of the CPC).

REGULATORY LEGAL FRAMEWORK      

The Constitution of the Republic of Kazakhstan;

The Civil Code of the Republic of Kazakhstan (CC);

The Civil Procedure Code of the Republic of Kazakhstan (CC)

Administrative Procedural Procedure Code of the Republic of Kazakhstan (APPK);

Budget Code of the Republic of Kazakhstan;

The Tax Code of the Republic of Kazakhstan;

The Law of the Republic of Kazakhstan "On Public Procurement" (the Law on Public Procurement);

The Law of the Republic of Kazakhstan "On State Audit and Financial Control" (the Law on GAiFK);

The Law of the Republic of Kazakhstan "On Legal Acts";

The Law of the Republic of Kazakhstan "On the National Welfare Fund";

The Law of the Republic of Kazakhstan "On procurement of certain entities of the quasi-public sector";

Rules of public procurement approved by the Order of the Minister of Finance of the Republic of Kazakhstan dated December 11, 2015 No. 648 (Rules No. 648);

Rules for the formation and maintenance of registers in the field of public procurement, approved by the Order of the Minister of Finance of the Republic of Kazakhstan dated December 28, 2015 No. 694 (Rules No. 694);

The rules of desk control approved by the Order of the Minister of Finance of the Republic of Kazakhstan dated November 30, 2015 No. 598 (Rules No. 598);

Rules for conducting Internal State audit and Financial Control, approved by the Order of the Minister of Finance of the Republic of Kazakhstan dated March 19, 2018 No. 392 (Rules No. 392);

Special public procurement procedure approved by Resolution of the Government of the Republic of Kazakhstan dated March 20, 2020 No. 127 (valid until December 31, 2020)

Rules for public procurement using a special procedure, approved by Resolution of the Government of Kazakhstan dated December 31, 2015 No. 1200 (Rules No. 1200);

Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated April 21, 2022 No. 4 "On the application of Legislation on public Procurement by Courts" (NPVS No. 4);

The Fund's Procurement Management Standard, approved by the decision of the Board of Directors of the Fund No. 31/19 dated September 3, 2019;

other regulatory legal acts of the Republic of Kazakhstan.

ABBREVIATIONS  

adminact – administrative act GZ - public procurement;

RNU – register of unscrupulous participants in public procurement; SMAS – specialized interdistrict administrative court;

SKAD – judicial board for administrative cases of the regional court;

SCAD of the Supreme Court of the Republic of Kazakhstan – judicial board for administrative cases of the Supreme Court of the Republic of Kazakhstan; ICES – specialized interdistrict economic court;

Ministry of Finance - Ministry of Finance of the Republic of Kazakhstan;

Treasury – Treasury Committee of the Ministry of Finance of the Republic of Kazakhstan;

KVGA – Internal State Audit Committee of the Ministry of Finance of the Republic of Kazakhstan;

DVGA – Department of Internal State Audit of the Internal State Audit Committee of the Ministry of Finance of the Republic of Kazakhstan;

GAiFK – State audit and Financial control;

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